From the Estimates,calculate the Return on Equity (After Tax)if Rf

question 26

Multiple Choice

From the estimates,calculate the return on equity (after tax) if Rf = 5%,E(Rm) = 13%,franking premium = 3%,beta = 1.5 and the corporate tax rate is 30 per cent.

• A)15.05%
• B)21.5%
• C)18.8%
• D)15%

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Definitions:

Realized Losses

Losses that occur when an asset is sold for less than its purchase price, thereby converting a theoretical loss into an actual loss.

Aversion

A strong dislike or disinclination towards something, often used in economics in the context of risk aversion.

Overconfidence

The bias in which someone's subjective confidence in their judgements is greater than their objective accuracy.

Framing Effect

A cognitive bias where people react differently to a particular choice depending on how it is presented.